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Smokers May Sue for Fraud, Justices Rule

08/06/02

SAN FRANCISCO -- Diseased smokers in California may sue tobacco
companies for fraud and negligence, relying on evidence of
misconduct for all but a 10-year period when cigarette makers were
protected from lawsuits, the California Supreme Court ruled
M

The court's action paves the way for many new lawsuits against the
industry and potential multimillion-dollar awards for victims.
Evidence that the industry may have altered tobacco with additives
to make it more addictive will be admissible regardless of the
industry's past protection from lawsuits.
Roughly 65 anti-tobacco lawsuits are pending in California. The
state high court's rulings in two cases Monday ensure that the
smokers and their heirs in these suits will be able to use a wide
range of internal tobacco industry documents from before 1988 that
have been deployed with devastating results so far in California.
But the state high court also gave some relief to cigarette makers.
The court held that most evidence of the industry's conduct from
1988 to 1998, when the state's legislative protections for tobacco
companies were in place, cannot be presented to a jury. The tobacco
immunity law was repealed in 1998.
The ruling has been long anticipated because three consecutive
large awards against cigarette makers have put California in the
forefront of the legal war over smoking. The threat from lawsuits
by individual California smokers is considered one of the greatest
legal problems facing the tobacco industry, along with a
racketeering suit by the U.S. Justice Department and a
$144.8-billion verdict in a Florida class-action lawsuit that is
under appeal.
Daniel U. Smith, who represented smokers in the two cases decided
Monday, called the rulings "a major victory for smoking victims in
California." He said smokers will prevail at trial without evidence
of the industry's conduct from 1988 to 1998.
"The mountain of evidence in these cases is from the '50s and the
'60s," Smith said.
The tobacco industry predicted that Monday's rulings will lead to
new trials in three cases in which California courts have awarded
smokers $153 million in verdicts against manufacturers.
Charles A. Blixt, general counsel for R.J. Reynolds Tobacco Co.,
called the rulings "a victory for fundamental fairness," because
they did not hold the industry responsible for actions taken during
the 10 years of immunity.
On a down day on Wall Street, tobacco stocks were up. Shares of
Philip Morris Cos., the top cigarette maker, rose $2.29 to $47.50;
R.J. Reynolds Tobacco gained $1.54 to $56.14. The favorable market
reaction appears to have been based on expectations that the
decisions would be even worse for the industry.
Monday's rulings came in two cases brought by smokers who died of
lung cancer. Both cases had been dismissed by trial courts on the
grounds that the 1988 immunity law barred such litigation.
The California Supreme Court revived the lawsuits and rejected
industry claims that the immunity law also protected the industry
for the years before 1988.
"With respect to conduct falling outside the 10-year immunity
period, the tobacco companies are not shielded from product
liability lawsuits," wrote Justice Joyce Kennard in Myers vs.
Philip Morris Cos., S095213.
The court, on the other hand, rejected plaintiffs' claims that the
1998 repeal eliminated the industry's protections for the prior
10-year period.
Betty Jean Myers, the plaintiff, smoked from 1956 until 1997 and
died at the age of 59 from lung cancer. A lawsuit being pressed by
her children was dismissed in federal district court on a motion by
the industry. Her children appealed to the U.S. 9th Circuit Court
of Appeals, which asked the California Supreme Court to clarify how
the decade of tobacco protection affects pending and future
lawsuits.
Justice Carlos Moreno, the sole dissenter in Myers' case, insisted
that the Legislature's repeal of the immunity law in 1998 was
retroactive and wiped out any lingering protection for the tobacco
industry.
The broader tort reform law that gave cigarette makers immunity has
been dubbed the "Napkin Deal." A group of powerful elected
officials, including then-Assembly Speaker Willie Brown and
then-Senate President Pro Tem Bill Lockyer, met with lobbyists from
several industries at Frank Fat's restaurant in Sacramento and
scrawled details of the proposed law on a napkin.
Philip C. Bourdette, who represents Myers' children, predicted they
will eventually prevail. "We are now back in court," he said.
Ronald Olson, who represented Philip Morris in the case, said he
also was gratified by the ruling because it will limit the evidence
Myers' family can present. "Clearly this narrowed the scope of the
litigation," he said.
In a companion case, Naegele vs. R.J. Reynolds Tobacco Co.,
S090420, the California Supreme Court ruled that the industry is
not completely protected from evidence of its conduct during the 10
years it enjoyed immunity. If the industry used additives to make
smoking more addictive, that evidence can be presented regardless
of time, the court said.
The Naegele case was brought by Edwin Brigham, who smoked
cigarettes from 1950 until he was diagnosed with lung cancer in
1996. He sued R.J. Reynolds Tobacco Co. and Brown & Williamson
Tobacco Corp. for negligence and fraud. When Brigham died, the suit
was carried on by Joseph Naegele, the trustee for the estate.
A state trial court dismissed his suit, and a Court of Appeal in
San Francisco upheld that decision. The Supreme Court ruled that
even during the 10-year period, immunity was not absolute.
"It does not extend to allegations that tobacco companies, in the
manufacture of cigarettes, used additives that exposed smokers to
dangers beyond those commonly known to be associated with cigarette
smoking," Kennard wrote in the 5-2 decision.
She stressed that the immunity law "does not shield a tobacco
company from liability for injuries or deaths caused by something
not inherent in the product itself." Plaintiffs say some cigarette
manufacturers have added ammonia to tobacco to make cigarettes more
addictive, a charge cigarette makers deny.
Justice Kathryn Mickle Werdegar, joined by Moreno, said in a
partial concurrence and dissent that the court should have limited
the impact of the immunity law even further to allow fraud claims
based on high-nicotine tobacco.
Brigham's case will return to the state Court of Appeal, which must
follow the state high court's lead.
H. Joseph Escher III, who represents R. J. Reynolds in the case,
said his client was "very happy" with the results. "They can't say
that tobacco companies are liable for anything they did during
those 10 years, except the notion that we adulterated the products
to make them more dangerous," Escher said, "which they will not be
able to prove."
But Madelyn Chaber, who represents Brigham's family, said there is
plenty of evidence against tobacco companies from before 1988.
"Anything that happened in that 1988 to 1998 period is merely a
sort of continuance of past conduct," she said.
Lawyers could appeal to the U.S. Supreme Court on several
constitutional issues, but none suggested Monday that they were
considering that.
Defense attorneys will use Monday's rulings to argue that three
multimillion-dollar verdicts against the tobacco industry since
1998 should be overturned because juries based their decisions at
least in part on evidence of tobacco company conduct from 1988 to
1998.
For example, plaintiffs introduced a 1994 videotape of tobacco CEOs
testifying under oath before Congress that they did not believe
nicotine was addictive.
Plaintiff lawyers say, however, that the overwhelming evidence in
those trials was about the industry's actions from the 1950s to the
1980s, when tobacco companies aggressively disputed evidence of the
harms of smoking.
In March 1999, in the first case tried after the repeal of the
immunity law, a San Francisco jury awarded $51.5 million to lung
cancer sufferer Patricia Henley. The trial judge later trimmed the
award to $26.5 million.
A year later, cancer victim Leslie J. Whiteley won $21.7 million
from Philip Morris and R.J. Reynolds.
And last June, a Los Angeles Superior Court jury ordered Philip
Morris to pay $5.54 million in compensatory damages and $3 billion
in punitive damages to 57-year-old Richard Boeken, who has since
died. The trial judge trimmed the punitive damages to $100
million.
Anti-tobacco lawsuits typically allege that cigarette makers could
have made safer cigarettes, but failed to, manipulated nicotine
delivery systems to sustain the addiction of their customers, and
concealed the hazards and addictiveness of their products.
The three smokers' victories are in various stages of appeal, and
William S. Ohlemeyer, vice president and associate general counsel
for Philip Morris, said Monday's rulings provide fresh ammunition
in seeking reversals.
"We will now review those cases to determine how the court's new
decision affects those appeals-including, for example, what
evidence should have been excluded at trial," Ohlemeyer said.
But Michael Piuze, who represented Richard Boeken, said he did not
believe the verdict will be thrown out as a result of Monday's
rulings, which he called "virtually a total loss" for the
industry.
Legal observers said the rulings, by providing a road map for
plaintiffs, are likely to trigger more lawsuits. But they cautioned
that the new claims may be less than a flood.
For one thing, they noted, California has a one-year statute of
limitations for most types of personal injury suits. That means
that people diagnosed with smoking-related ailments more than a
year ago are ineligible. People who were recently diagnosed, or
suffer smoking-related diseases in the future, can sue.
And Chaber, who was the lawyer for Henley and Whiteley and also
represented Myers in the appeals, said doing battle with the
tobacco industry is still a daunting prospect for many potential
plaintiffs and their lawyers.
She cited a case in which tobacco defendants have sought the
computer hard drive of a plaintiff "so they can look at every
e-mail they ever sent."
For many potential litigants, "there isn't the time or the energy
or the money to invest in cases that have no chance of settling,"
Chaber said.